‘State Capitalism’? Or Socialist Market Economy? Which Shoe Fits Whom?

Qiushi Magazine
CCP Central Committee Fall 2018

The United States equates China’s economy with “state capitalism”, saying socialist market economy is not real market economy but state-led protectionist and mercantilist economy, which, it claims justifies the imposition of high tariffs on Chinese goods.

This is not the first time a Western country has labeled China’s economic model as “state capitalism”. Some people are re-circulating the term in the West now to hide the real reason why the US has resorted to trade protectionism and imposed high tariffs on Chinese imports, namely, their concern over China’s development road and economic system.

The US is a self-proclaimed representative of free market economy and free market capitalism, but the government’s role has been particularly important in its economic development. Let us not forget, the US has resorted to protectionism from its founding to the end of World War II.

Using free market as a ploy to make profits

In the postwar period, too, the US administration has intervened in the economy to fulfill its self-interests even while promoting trade liberalization, as Keynesianism came to play the dominant role in US economic policymaking. For example, the US’ total government spending increased from 26.8 percent of GDP in 1960 to 41.3 percent in 2010, and the number of its government employees increased from more than 4 million in 1940 to more than 22 million in 2010.

Some experts on innovation say, despite advocating “small government” and “free market”, the US has been running massive public investment programs in technology and innovation for decades, which have brought the US great economic benefits. In fact, the US government has always been a central driver of innovation-led growth, from internet to biotechnology and even shale gas development. After the outbreak of the 2008 global financial crisis, the US once again resorted to state interventionism, and introduced huge financial rescue and fiscal stimulus packages to stabilize its economy.

Since taking office, President Donald Trump and his administration have been using interventionist policies, such as protectionism and immigration control measures, to realize their “America first” goal at the cost of the interests of people around the world. Which shows the “pure” free market economy and “true” laissez-faire that the US bandies about have never existed. Instead, capitalism as we see it today is closely related to “state capitalism”. So to label China’s socialist market economy as “state capitalism” is to confuse one thing with another.

“State-capitalism” theory a result of ill intentions

After the global financial crisis, some developed economies, such as the US and some European countries, faced severe economic difficulties while China and many other emerging economies maintained relatively strong growth. The resultant rise and fall in the relative strengths of China and the US made the contradictions among the developed economies, and those between the developed world and emerging economies, such as China, increasingly prominent.

Some politicians cannot accept China’s rapid but peaceful rise under the leadership of the Communist Party of China, so they use terms such as “state capitalism” to criticize it. The intention of such people is clear: to defend capitalism by pitting “state capitalism” against “liberal capitalism” and creating an atmosphere that would curb the development of developing and emerging market economies, especially China.

On the one hand, such observers try to divert and cover up people’s discontent with the profound defects of the capitalist system, and claim free market capitalism is facing a crisis because of the threat posed by “state capitalism”. On the other hand, they try to find faults with socialism with Chinese characteristics, so as to distort the attributes of socialist market economy with the aim of shaking people’s confidence in the socialist market system, and forcing China to abandon its development path. Their ultimate is to contain China’s rise.

Such people always use double standards when it comes describing the attributes of “state capitalism”. When Western economies need state support for capital accumulation, these people advocate protectionism and state intervention. But when Western economies enjoy competitive advantage, they forcibly promote free trade and require other countries to unconditionally open up their markets, so as to benefit from it. And when the Western economies’ competitive advantages fade out due to competition from other economies, including latecomers such as China, they go back to practicing protectionism.

A pretext for not accepting reality

Many observers and politicians have attempted to include China into the capitalist spectrum, or assumed that by adhering to the rules of market economy, China will automatically embrace the capitalist system. But when they realize socialism with Chinese characteristics, compared with capitalism, is yielding better results, some of them start identifying China’s socialist market economy with “state capitalism”, instead of admitting that socialism with Chinese characteristics and socialist market economy have achieved success beyond their wildest dreams. This is the essence of their “state capitalism” argument.

Western countries have always regarded market economy as their exclusive economic system, as is evidenced from Western economic theories. But market economy and capitalism are two different things, the former being a means to allocate resources, which can be combined either with the capitalist or socialist system.

Capitalist market economy and socialist market economy share common features in terms of resource allocation and commodity relations. For example, both have clear property rights relations and require market players to maintain equal and fair competition. And both allow the market to play a decisive role in resource allocation.

The macro-regulatory policies implemented by China conform to the laws of market economy and the rules of the World Trade Organization. Yet market economy is a social and historical concept with different characteristics under different social systems and stages of development. Socialist market economy is a new type of market economy, which, despite having the general characteristics of market economy, is fundamentally different from capitalist market economy in terms of ownership structure, distribution system and institutional mechanism. So it is erroneous to identify the Chinese economy as “state capitalism” just because China has State-owned enterprises and its government plays a role in some economic activities.

Argument on SOEs untenable, baseless

Moreover, it is grossly erroneous to equate state-owned enterprises with “state capitalism”, as SOEs are just a means to ensure large-scale production through modern methods. In fact, state-owned enterprises first appeared in Western capitalist countries.

In the postwar period, some capitalist countries nationalized enterprises on a large scale, and established a large number of SOEs in many sectors. Even when the wave of privatization was at its peak, many Western countries retained a sizable number of state-owned enterprises. In fact, even after the outbreak of the 2008 global financial crisis, some Western countries took measures to nationalize a number of enterprises to offset the effects of the economic slowdown, which shows the West also uses state-owned enterprises as a means to resolve the basic contradictions of capitalism.

However, it should also be noted that the natures and functions of state-owned enterprises vary in different social systems. In Western economies, state-owned enterprises are essentially controlled by a few big capitalists backed by governments and operate to make more and more profits. In a socialist market economy, however, SOEs are owned by the people, and serve as an important tool for promoting modernization and safeguarding the common interests of the people. They shoulder multiple responsibilities, from providing public services, developing strategically important industries and protecting the environment to promoting science and technology, safeguarding national security, facilitating fair resource distribution and realizing common prosperity. These traits distinguish them from their counterparts in capitalist market economies.

Is this Western envy or jealousy?

The fundamental reason why some Western politicians target China’s SOEs for criticism is that these enterprises have become bigger and stronger than Western politicians’ expectations, and are helping China to develop into a comprehensive modern socialist power to realize the Chinese Dream of national rejuvenation.

Yet there is no inherent logic in using the role of the government to identify the Chinese economy with “state capitalism”. The relationship between the government and the market depends on the evolution of the economic system, with the two being mutually complementary and indivisible. This is the development law of market economy.

Capitalist market economy and socialist market economy both need effective market regulations — which only the government can provide — for the supply of public goods, maintenance of macroeconomic stability, improvement of the social security system and strengthening of economic security.

In a capitalist market economy, which is based on private ownership, the government is not only the spokesperson for capital but also serves the interests of capital. As a result, it is difficult for the government to ensure economic and social development serves the interests of the entire society, so as to resolve the basic contradictions between socialization of production and private ownership.

Govt represents people in socialist market economy

In contrast, a socialist market economy is dominated by public ownership, in which the government represents the people and serves their interests. This makes it possible for the government to implement regulations for social and economic development in order to meet the people’s increasing needs for a better life, and achieve prosperity for all.

The difference between socialist market economy and capitalist market economy, as such, is not whether the market or the government plays a decisive role in the allocation of resources, or whether state-owned enterprises exist. Instead, it depends on whether the government and market are serving capital or the people.

Those that equate the Chinese economy with “state capitalism” claim that an economy in which the government intervenes to serve the interests of capital and private ownership will be seen as following the “free market system” irrespective of the extent of its intervention. In contrast, a socialist market economy for them is equivalent to “state capitalism” regardless of the aim and magnitude of the government intervention.

This shows such observers identify Western countries with the “free market system” even if their governments support enterprises with policies and financing. But if an emerging market economy does the same, it is labeled “state capitalism”. Which is a typical example of economic hegemony.

Since launching reform and opening-up four decades ago, China has developed the socialist development road, theory, system and culture with Chinese characteristics, fulfilled the basic economic requirements to build the primary stage of socialism, allowed public ownership to develop along with private and other forms of ownership, and transformed from a planned economy to a dynamic socialist market economy.

Fostering development of high quality

Moreover, since the 18th National Congress of the CPC, China, under the strong leadership of the CPC Central Committee with Xi Jinping at the core, has more vigorously helped the market to play a decisive role in resource allocation. Simultaneously, the government has taken concrete measures to improve the property rights system, further deepen economic reform, and improve the socialist economic system with Chinese characteristics, in order to promote high-quality economic development.

China is committed to building a community with a shared future for mankind and improving global economic governance, by safeguarding and promoting economic globalization and free trade. In this regard, it has taken a series of measures to greatly ease access to its huge market, build a more attractive investment environment, strengthen intellectual property rights protection and expand imports.

A socialist market economy gives full play to the advantages of market economy and the socialist system, and helps build an organic bond between the government and the market. It also ensures sustainable development and market stability, which have benefited the Chinese people and contributed to human development and progress across the world.

These are the great achievements of socialist market economy and socialism with Chinese characteristics, and have nothing to do with “state capitalism”.

The socialist economic system with Chinese characteristics is the result of Chinese wisdom, the Party’s leadership and Chinese people’s efforts to build a prosperous but sustainable social and economic system, and thus a great innovation in economic development history. Chinese people, led by the Party, have embarked on the road of socialism with Chinese characteristics. And they most certainly will achieve success after greater success.

Yanis Varoufakis: ‘Karl Marx was responsible for framing my perspective of the world we live in, from my childhood to this day.’

Before he entered politics, Yanis Varoufakis, the iconoclastic Greek finance minister at the centre of the latest eurozone standoff, wrote this searing account of European capitalism and and how the left can learn from Marx’s mistakes

By Yanis Varoufakis
The Guardian / UK

Feb 18 2015 – In 2008, capitalism had its second global spasm. The financial crisis set off a chain reaction that pushed Europe into a downward spiral that continues to this day. Europe’s present situation is not merely a threat for workers, for the dispossessed, for the bankers, for social classes or, indeed, nations. No, Europe’s current posture poses a threat to civilisation as we know it.

If my prognosis is correct, and we are not facing just another cyclical slump soon to be overcome, the question that arises for radicals is this: should we welcome this crisis of European capitalism as an opportunity to replace it with a better system? Or should we be so worried about it as to embark upon a campaign for stabilising European capitalism?

To me, the answer is clear. Europe’s crisis is far less likely to give birth to a better alternative to capitalism than it is to unleash dangerously regressive forces that have the capacity to cause a humanitarian bloodbath, while extinguishing the hope for any progressive moves for generations to come.

For this view I have been accused, by well-meaning radical voices, of being “defeatist” and of trying to save an indefensible European socioeconomic system. This criticism, I confess, hurts. And it hurts because it contains more than a kernel of truth.

I share the view that this European Union is typified by a large democratic deficit that, in combination with the denial of the faulty architecture of its monetary union, has put Europe’s peoples on a path to permanent recession. And I also bow to the criticism that I have campaigned on an agenda founded on the assumption that the left was, and remains, squarely defeated. I confess I would much rather be promoting a radical agenda, the raison d’être of which is to replace European capitalism with a different system.

Yet my aim here is to offer a window into my view of a repugnant European capitalism whose implosion, despite its many ills, should be avoided at all costs. It is a confession intended to convince radicals that we have a contradictory mission: to arrest the freefall of European capitalism in order to buy the time we need to formulate its alternative.

Why a Marxist?

When I chose the subject of my doctoral thesis, back in 1982, I deliberately focused on a highly mathematical topic within which Marx’s thought was irrelevant. When, later on, I embarked on an academic career, as a lecturer in mainstream economics departments, the implicit contract between myself and the departments that offered me lectureships was that I would be teaching the type of economic theory that left no room for Marx. In the late 1980s, I was hired by the University of Sydney’s school of economics in order to keep out a leftwing candidate (although I did not know this at the time).

After I returned to Greece in 2000, I threw my lot in with the future prime minister George Papandreou, hoping to help stem the return to power of a resurgent right wing that wanted to push Greece towards xenophobia both domestically and in its foreign policy. As the whole world now knows, Papandreou’s party not only failed to stem xenophobia but, in the end, presided over the most virulent neoliberal macroeconomic policies that spearheaded the eurozone’s so-called bailouts thus, unwittingly, causing the return of Nazis to the streets of Athens. Even though I resigned as Papandreou’s adviser early in 2006, and turned into his government’s staunchest critic during his mishandling of the post-2009 Greek implosion, my public interventions in the debate on Greece and Europe have carried no whiff of Marxism.

Given all this, you may be puzzled to hear me call myself a Marxist. But, in truth, Karl Marx was responsible for framing my perspective of the world we live in, from my childhood to this day. This is not something that I often volunteer to talk about in “polite society” because the very mention of the M-word switches audiences off. But I never deny it either. After a few years of addressing audiences with whom I do not share an ideology, a need has crept up on me to talk about Marx’s imprint on my thinking. To explain why, while an unapologetic Marxist, I think it is important to resist him passionately in a variety of ways. To be, in other words, erratic in one’s Marxism.

If my whole academic career largely ignored Marx, and my current policy recommendations are impossible to describe as Marxist, why bring up my Marxism now? The answer is simple: Even my non-Marxist economics was guided by a mindset influenced by Marx.

A radical social theorist can challenge the economic mainstream in two different ways, I always thought. One way is by means of immanent criticism. To accept the mainstream’s axioms and then expose its internal contradictions. To say: “I shall not contest your assumptions but here is why your own conclusions do not logically flow on from them.” This was, indeed, Marx’s method of undermining British political economics. He accepted every axiom by Adam Smith and David Ricardo in order to demonstrate that, in the context of their assumptions, capitalism was a contradictory system. The second avenue that a radical theorist can pursue is, of course, the construction of alternative theories to those of the establishment, hoping that they will be taken seriously.

My view on this dilemma has always been that the powers that be are never perturbed by theories that embark from assumptions different to their own. The only thing that can destabilise and genuinely challenge mainstream, neoclassical economists is the demonstration of the internal inconsistency of their own models. It was for this reason that, from the very beginning, I chose to delve into the guts of neoclassical theory and to spend next to no energy trying to develop alternative, Marxist models of capitalism. My reasons, I submit, were quite Marxist.

    When called upon to comment on the world we live in, I had no alternative but to fall back on Marxist tradition

When called upon to comment on the world we live in, I had no alternative but to fall back on the Marxist tradition which had shaped my thinking ever since my metallurgist father impressed upon me, when I was still a child, the effect of technological innovation on the historical process. How, for instance, the passage from the bronze age to the iron age sped up history; how the discovery of steel greatly accelerated historical time; and how silicon-based IT technologies are fast-tracking socioeconomic and historical discontinuities.

My first encounter with Marx’s writings came very early in life, as a result of the strange times I grew up in, with Greece exiting the nightmare of the neofascist dictatorship of 1967-74. What caught my eye was Marx’s mesmerising gift for writing a dramatic script for human history, indeed for human damnation, that was also laced with the possibility of salvation and authentic spirituality.

Marx created a narrative populated by workers, capitalists, officials and scientists who were history’s dramatis personae. They struggled to harness reason and science in the context of empowering humanity while, contrary to their intentions, unleashing demonic forces that usurped and subverted their own freedom and humanity.

This dialectical perspective, where everything is pregnant with its opposite, and the eager eye with which Marx discerned the potential for change in what seemed to be the most unchanging of social structures, helped me to grasp the great contradictions of the capitalist era. It dissolved the paradox of an age that generated the most remarkable wealth and, in the same breath, the most conspicuous poverty. Today, turning to the European crisis, the crisis in the United States and the long-term stagnation of Japanese capitalism, most commentators fail to appreciate the dialectical process under their nose. They recognise the mountain of debts and banking losses but neglect the opposite side of the same coin: the mountain of idle savings that are “frozen” by fear and thus fail to convert into productive investments. A Marxist alertness to binary oppositions might have opened their eyes.

A major reason why established opinion fails to come to terms with contemporary reality is that it never understood the dialectically tense “joint production” of debts and surpluses, of growth and unemployment, of wealth and poverty, indeed of good and evil. Marx’s script alerted us these binary oppositions as the sources of history’s cunning.

From my first steps of thinking like an economist, to this very day, it occurred to me that Marx had made a discovery that must remain at the heart of any useful analysis of capitalism. It was the discovery of another binary opposition deep within human labour. Between labour’s two quite different natures: i) labour as a value-creating activity that can never be quantified in advance (and is therefore impossible to commodify), and ii) labour as a quantity (eg, numbers of hours worked) that is for sale and comes at a price. That is what distinguishes labour from other productive inputs such as electricity: its twin, contradictory, nature. A differentiation-cum-contradiction that political economics neglected to make before Marx came along and that mainstream economics is steadfastly refusing to acknowledge today.

Both electricity and labour can be thought of as commodities. Indeed, both employers and workers struggle to commodify labour. Employers use all their ingenuity, and that of their HR management minions, to quantify, measure and homogenise labour. Meanwhile, prospective employees go through the wringer in an anxious attempt to commodify their labour power, to write and rewrite their CVs in order to portray themselves as purveyors of quantifiable labour units. And there’s the rub. If workers and employers ever succeed in commodifying labour fully, capitalism will perish. This is an insight without which capitalism’s tendency to generate crises can never be fully grasped and, also, an insight that no one has access to without some exposure to Marx’s thought.
Science fiction becomes documentary

In the classic 1953 film Invasion of the Body Snatchers, the alien force does not attack us head on, unlike in, say, HG Wells’s The War of the Worlds. Instead, people are taken over from within, until nothing is left of their human spirit and emotions. Their bodies are shells that used to contain a free will and which now labour, go through the motions of everyday “life”, and function as human simulacra “liberated” from the unquantifiable essence of human nature. This is something like what would have transpired if human labour had become perfectly reducible to human capital and thus fit for insertion into the vulgar economists’ models.

Every non-Marxist economic theory that treats human and non-human productive inputs as interchangeable assumes that the dehumanisation of human labour is complete. But if it could ever be completed, the result would be the end of capitalism as a system capable of creating and distributing value. For a start, a society of dehumanised automata would resemble a mechanical watch full of cogs and springs, each with its own unique function, together producing a “good”: timekeeping. Yet if that society contained nothing but other automata, timekeeping would not be a “good”. It would certainly be an “output” but why a “good”? Without real humans to experience the clock’s function, there can be no such thing as “good” or “bad”.

If capital ever succeeds in quantifying, and subsequently fully commodifying, labour, as it is constantly trying to, it will also squeeze that indeterminate, recalcitrant human freedom from within labour that allows for the generation of value. Marx’s brilliant insight into the essence of capitalist crises was precisely this: the greater capitalism’s success in turning labour into a commodity the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next recession of the economy as a system. The portrayal of human freedom as an economic category is unique in Marx, making possible a distinctively dramatic and analytically astute interpretation of capitalism’s propensity to snatch recession, even depression, from the jaws of growth.

When Marx was writing that labour is the living, form-giving fire; the transitoriness of things; their temporality; he was making the greatest contribution any economist has ever made to our understanding of the acute contradiction buried inside capitalism’s DNA. When he portrayed capital as a “… force we must submit to … it develops a cosmopolitan, universal energy which breaks through every limit and every bond and posts itself as the only policy, the only universality the only limit and the only bond”, he was highlighting the reality that labour can be purchased by liquid capital (ie money), in its commodity form, but that it will always carry with it a will hostile to the capitalist buyer. But Marx was not just making a psychological, philosophical or political statement. He was, rather, supplying a remarkable analysis of why the moment that labour (as an unquantifiable activity) sheds this hostility, it becomes sterile, incapable of producing value.

At a time when neoliberals have ensnared the majority in their theoretical tentacles, incessantly regurgitating the ideology of enhancing labour productivity in an effort to enhance competitiveness with a view to creating growth etc, Marx’s analysis offers a powerful antidote. Capital can never win in its struggle to turn labour into an infinitely elastic, mechanised input, without destroying itself. That is what neither the neoliberals nor the Keynesians will ever grasp. “If the whole class of the wage-labourer were to be annihilated by machinery”, wrote Marx “how terrible that would be for capital, which, without wage-labour, ceases to be capital!”

What has Marx done for us?

Almost all schools of thought, including those of some progressive economists, like to pretend that, though Marx was a powerful figure, very little of his contribution remains relevant today. I beg to differ. Besides having captured the basic drama of capitalist dynamics, Marx has given me the tools with which to become immune to the toxic propaganda of neoliberalism. For example, the idea that wealth is privately produced and then appropriated by a quasi-illegitimate state, through taxation, is easy to succumb to if one has not been exposed first to Marx’s poignant argument that precisely the opposite applies: wealth is collectively produced and then privately appropriated through social relations of production and property rights that rely, for their reproduction, almost exclusively on false consciousness.

In his recent book Never Let a Serious Crisis Go to Waste, the historian of economic thought, Philip Mirowski, has highlighted the neoliberals’ success in convincing a large array of people that markets are not just a useful means to an end but also an end in themselves. According to this view, while collective action and public institutions are never able to “get it right”, the unfettered operations of decentralised private interest are guaranteed to produce not only the right outcomes but also the right desires, character, ethos even. The best example of this form of neoliberal crassness is, of course, the debate on how to deal with climate change. Neoliberals have rushed in to argue that, if anything is to be done, it must take the form of creating a quasi-market for “bads” (eg an emissions trading scheme), since only markets “know” how to price goods and bads appropriately. To understand why such a quasi-market solution is bound to fail and, more importantly, where the motivation comes from for such “solutions”, one can do much worse than to become acquainted with the logic of capital accumulation that Marx outlined and the Polish economist Michal Kalecki adapted to a world ruled by networked oligopolies.

Neoliberals have rushed in with quasi-market responses to climate change, such as emissions trading schemes.

In the 20th century, the two political movements that sought their roots in Marx’s thought were the communist and social democratic parties. Both of them, in addition to their other errors (and, indeed, crimes) failed, to their detriment, to follow Marx’s lead in a crucial regard: instead of embracing liberty and rationality as their rallying cries and organising concepts, they opted for equality and justice, bequeathing the concept of freedom to the neoliberals. Marx was adamant: The problem with capitalism is not that it is unfair but that it is irrational, as it habitually condemns whole generations to deprivation and unemployment and even turns capitalists into angst-ridden automata, living in permanent fear that unless they commodify their fellow humans fully so as to serve capital accumulation more efficiently, they will cease to be capitalists. So, if capitalism appears unjust this is because it enslaves everyone; it wastes human and natural resources; the same production line that pumps out remarkable gizmos and untold wealth, also produces deep unhappiness and crises.

Having failed to couch a critique of capitalism in terms of freedom and rationality, as Marx thought essential, social democracy and the left in general allowed the neoliberals to usurp the mantle of freedom and to win a spectacular triumph in the contest of ideologies.

Perhaps the most significant dimension of the neoliberal triumph is what has come to be known as the “democratic deficit”. Rivers of crocodile tears have flowed over the decline of our great democracies during the past three decades of financialisation and globalisation. Marx would have laughed long and hard at those who seem surprised, or upset, by the “democratic deficit”. What was the great objective behind 19th-century liberalism? It was, as Marx never tired of pointing out, to separate the economic sphere from the political sphere and to confine politics to the latter while leaving the economic sphere to capital. It is liberalism’s splendid success in achieving this long-held goal that we are now observing. Take a look at South Africa today, more than two decades after Nelson Mandela was freed and the political sphere, at long last, embraced the whole population. The ANC’s predicament was that, in order to be allowed to dominate the political sphere, it had to give up power over the economic one. And if you think otherwise, I suggest that you talk to the dozens of miners gunned down by armed guards paid by their employers after they dared demand a wage rise.
Why erratic?

Having explained why I owe whatever understanding of our social world I may possess largely to Karl Marx, I now want to explain why I remain terribly angry with him. In other words, I shall outline why I am by choice an erratic, inconsistent Marxist. Marx committed two spectacular mistakes, one of them an error of omission, the other one of commission. Even today, these mistakes still hamper the left’s effectiveness, especially in Europe.

Marx’s first error – the error of omission was that he failed to give sufficient thought to the impact of his own theorising on the world that he was theorising about. His theory is discursively exceptionally powerful, and Marx had a sense of its power. So how come he showed no concern that his disciples, people with a better grasp of these powerful ideas than the average worker, might use the power bestowed upon them, via Marx’s own ideas, in order to abuse other comrades, to build their own power base, to gain positions of influence?

Marx’s second error, the one I ascribe to commission, was worse. It was his assumption that truth about capitalism could be discovered in the mathematics of his models. This was the worst disservice he could have delivered to his own theoretical system. The man who equipped us with human freedom as a first-order economic concept; the scholar who elevated radical indeterminacy to its rightful place within political economics; he was the same person who ended up toying around with simplistic algebraic models, in which labour units were, naturally, fully quantified, hoping against hope to evince from these equations some additional insights about capitalism. After his death, Marxist economists wasted long careers indulging a similar type of scholastic mechanism. Fully immersed in irrelevant debates on “the transformation problem” and what to do about it, they eventually became an almost extinct species, as the neoliberal juggernaut crushed all dissent in its path.

How could Marx be so deluded? Why did he not recognise that no truth about capitalism can ever spring out of any mathematical model, however brilliant the modeller may be? Did he not have the intellectual tools to realise that capitalist dynamics spring from the unquantifiable part of human labour; ie from a variable that can never be well-defined mathematically? Of course he did, since he forged these tools! No, the reason for his error is a little more sinister: just like the vulgar economists that he so brilliantly admonished (and who continue to dominate the departments of economics today), he coveted the power that mathematical “proof” afforded him.

    Why did Marx not recognise that no truth about capitalism can ever spring out of any mathematical model?

If I am right, Marx knew what he was doing. He understood, or had the capacity to know, that a comprehensive theory of value cannot be accommodated within a mathematical model of a dynamic capitalist economy. He was, I have no doubt, aware that a proper economic theory must respect the idea that the rules of the undetermined are themselves undetermined. In economic terms this meant a recognition that the market power, and thus the profitability, of capitalists was not necessarily reducible to their capacity to extract labour from employees; that some capitalists can extract more from a given pool of labour or from a given community of consumers for reasons that are external to Marx’s own theory.

Alas, that recognition would be tantamount to accepting that his “laws” were not immutable. He would have to concede to competing voices in the trades union movement that his theory was indeterminate and, therefore, that his pronouncements could not be uniquely and unambiguously correct. That they were permanently provisional. This determination to have the complete, closed story, or model, the final word, is something I cannot forgive Marx for. It proved, after all, responsible for a great deal of error and, more significantly, authoritarianism. Errors and authoritarianism that are largely responsible for the left’s current impotence as a force of good and as a check on the abuses of reason and liberty that the neoliberal crew are overseeing today.

Mrs Thatcher’s lesson

I moved to England to attend university in September 1978, six months or so before Margaret Thatcher’s victory changed Britain forever. Watching the Labour government disintegrate, under the weight of its degenerate social democratic programme, led me to a serious error: to the thought that Thatcher’s victory could be a good thing, delivering to Britain’s working and middle classes the short, sharp shock necessary to reinvigorate progressive politics; to give the left a chance to create a fresh, radical agenda for a new type of effective, progressive politics.

Even as unemployment doubled and then trebled, under Thatcher’s radical neoliberal interventions, I continued to harbour hope that Lenin was right: “Things have to get worse before they get better.” As life became nastier, more brutish and, for many, shorter, it occurred to me that I was tragically in error: things could get worse in perpetuity, without ever getting better. The hope that the deterioration of public goods, the diminution of the lives of the majority, the spread of deprivation to every corner of the land would, automatically, lead to a renaissance of the left was just that: hope.

The reality was, however, painfully different. With every turn of the recession’s screw, the left became more introverted, less capable of producing a convincing progressive agenda and, meanwhile, the working class was being divided between those who dropped out of society and those co-opted into the neoliberal mindset. My hope that Thatcher would inadvertently bring about a new political revolution was well and truly bogus. All that sprang out of Thatcherism were extreme financialisation, the triumph of the shopping mall over the corner store, the fetishisation of housing and Tony Blair.
Margaret Thatcher at the Conservative party conference in 1982.

Instead of radicalising British society, the recession that Thatcher’s government so carefully engineered, as part of its class war against organised labour and against the public institutions of social security and redistribution that had been established after the war, permanently destroyed the very possibility of radical, progressive politics in Britain. Indeed, it rendered impossible the very notion of values that transcended what the market determined as the “right” price.

The lesson Thatcher taught me about the capacity of a long-lasting recession to undermine progressive politics, is one that I carry with me into today’s European crisis. It is, indeed, the most important determinant of my stance in relation to the crisis. It is the reason I am happy to confess to the sin I am accused of by some of my critics on the left: the sin of choosing not to propose radical political programs that seek to exploit the crisis as an opportunity to overthrow European capitalism, to dismantle the awful eurozone, and to undermine the European Union of the cartels and the bankrupt bankers.

Yes, I would love to put forward such a radical agenda. But, no, I am not prepared to commit the same error twice. What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Thatcher’s neoliberal trap? Precisely none. What good will it do today to call for a dismantling of the eurozone, of the European Union itself, when European capitalism is doing its utmost to undermine the eurozone, the European Union, indeed itself?

A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe is would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone.

I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s. If this means that it is we, the suitably erratic Marxists, who must try to save European capitalism from itself, so be it. Not out of love for European capitalism, for the eurozone, for Brussels, or for the European Central Bank, but just because we want to minimise the unnecessary human toll from this crisis.

What should Marxists do?

Europe’s elites are behaving today as if they understand neither the nature of the crisis that they are presiding over, nor its implications for the future of European civilisation. Atavistically, they are choosing to plunder the diminishing stocks of the weak and the dispossessed in order to plug the gaping holes of the financial sector, refusing to come to terms with the unsustainability of the task.

Yet with Europe’s elites deep in denial and disarray, the left must admit that we are just not ready to plug the chasm that a collapse of European capitalism would open up with a functioning socialist system. Our task should then be twofold. First, to put forward an analysis of the current state of play that non-Marxist, well meaning Europeans who have been lured by the sirens of neoliberalism, find insightful. Second, to follow this sound analysis up with proposals for stabilising Europe – for ending the downward spiral that, in the end, reinforces only the bigots.

Let me now conclude with two confessions. First, while I am happy to defend as genuinely radical the pursuit of a modest agenda for stabilising a system that I criticise, I shall not pretend to be enthusiastic about it. This may be what we must do, under the present circumstances, but I am sad that I shall probably not be around to see a more radical agenda being adopted.

    Europe’s elites are behaving as if they understand neither the nature of the crisis, nor its implications for the future

My final confession is of a highly personal nature: I know that I run the risk of, surreptitiously, lessening the sadness from ditching any hope of replacing capitalism in my lifetime by indulging a feeling of having become agreeable to the circles of polite society. The sense of self-satisfaction from being feted by the high and mighty did begin, on occasion, to creep up on me. And what a non-radical, ugly, corruptive and corrosive sense it was.

My personal nadir came at an airport. Some moneyed outfit had invited me to give a keynote speech on the European crisis and had forked out the ludicrous sum necessary to buy me a first-class ticket. On my way back home, tired and with several flights under my belt, I was making my way past the long queue of economy passengers, to get to my gate. Suddenly I noticed, with horror, how easy it was for my mind to be infected with the sense that I was entitled to bypass the hoi polloi. I realised how readily I could forget that which my leftwing mind had always known: that nothing succeeds in reproducing itself better than a false sense of entitlement. Forging alliances with reactionary forces, as I think we should do to stabilise Europe today, brings us up against the risk of becoming co-opted, of shedding our radicalism through the warm glow of having “arrived” in the corridors of power.

Radical confessions, like the one I have attempted here, are perhaps the only programmatic antidote to ideological slippage that threatens to turn us into cogs of the machine. If we are to forge alliances with our political adversaries we must avoid becoming like the socialists who failed to change the world but succeeded in improving their private circumstances. The trick is to avoid the revolutionary maximalism that, in the end, helps the neoliberals bypass all opposition to their self-defeating policies and to retain in our sights capitalism’s inherent failures while trying to save it, for strategic purposes, from itself.

This article is adapted from a lecture originally delivered at the 6th Subversive Festival in Zagreb in 2013

Deng Xiaoping – The World’s Greatest Economist

By John Ross

China.org.cn, August 22, 2014

August 22, 2014 is the 110th anniversary of the birth of Deng Xiaoping. Numerous achievements would ensure Deng Xiaoping a major position in China’s history – his role in shaping the People’s Republic of China, his steadfastness during persecution in the Cultural Revolution, his extraordinarily balanced attitude even after return to power towards the development and recent history of China, his all-round role after 1978 in leading the country.

But one ensures him a position among a tiny handful of people at the peak not only of Chinese but of world history. This was China’s extraordinary economic achievement after reforms began in 1978, and the decisive role this played not only in the improvement of the living standards of Chinese people but the country’s national rejuvenation. So great was the impact of this that it may objectively be said to have altered the situation not only of China but of the world.

China’s economic performance after the beginning of its 1978 reforms simply exceeded the experience of any other country in human history. To give only a partial list:

• China achieved the most rapid growth in a major economy in world history.

• China experienced the fastest growth of living standards of any major economy.

• China lifted 620 million people out of internationally defined poverty.

• Measured in internationally comparable prices, adjusted for inflation, the greatest increase in economic output in a single year in any country outside China was the U.S. in 1999, when it added US$567 billion, whereas in 2010 China added US$1,126 billion – twice as much.

• During the beginning of China’s rapid growth, 22 percent of the world’s population was within its borders – seven times that of United States at the beginning of its own fast economic development.

Wholly implausibly, it is sometimes argued that this success was merely due to "pragmatism" and achieved without overall economic theories, concepts, or a leadership really understanding the subject (particularly with no knowledge of U.S. academic economics!). If true, then the study of economics should immediately be abandoned – if the greatest economic success in world history can be achieved without any understanding of the subject, then it is evidently of no practical value whatever.

In reality this argument is entirely specious. Deng Xiaoping’s approach to economic policy was certainly highly practical regarding application – the famous "it doesn’t matter if a cat is black or white provided it catches mice." But it was extremely theoretical regarding foundations – as shown clearly in such works as In Everything We Do We Must Proceed from the Realities of the Primary Stage of Socialism, We Are Undertaking An Entirely New Endeavour, and Adhere to the Principle to Each According to his Work. Deng Xiaoping’s outstanding practical success was guided by a clearly defined theoretical underpinning, which can be understood particularly clearly in its historical context and in comparison with Western and other economists.

As is generally known, after 1949 the newly created People’s Republic of China constructed an economy, fundamental elements of which were drawn from the Soviet Union. It is important to understand that there was nothing irrational in this – the USSR, up to that time, had the world’s most rapidly growing economy.

Indeed, the immediate post-1929 success of the USSR was of extraordinary dimensions. During 1929-39 the USSR achieved 6 percent annual GDP growth, which until then was by far the fastest ever achieved by a major economy, and almost twice the historical growth rate of the United States. Despite colossal destruction in World War II, by 1949 the USSR had already regained its prewar production level.

The elements which produced such historically unprecedented economic growth were clear. From 1929, Stalin, with the First Five Year Plan, launched the USSR on an economic policy never previously attempted in any country – construction of a national basically self-enclosed administered economy. Resources were not allocated by price but by material quantities – a steel factory did not buy iron ore on the market but had it allocated by administrative decision. Foreign trade was minimized. State ownership was applied even to small scale private enterprises such as restaurants. Farmers’ small holdings were eliminated and agriculture organized into large scale collective farms.

Despite verbal claims that this policy was "Marxist," Stalin’s economic structure was in fact radically at variance with that of Marx himself. To use the Marxist terminology common to both China and the USSR, Soviet economic policy in 1929, in a single step, replaced economic regulation by prices (exchange value) by allocation by material use (use value).

Marx had written a socialist state would: "wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state… and to increase the total productive forces as rapidly as possible." In writing "by degree" Marx clearly envisaged a period during which state owned and private property would both exist. Instead, in the USSR in 1929 essentially all property was taken into the state sector.

The very word "socialism" is derived from "socialized" (i.e. large scale) production – not small scale peasant output. However in the USSR, after 1929, even small scale peasant plots were taken into state ownership – prior to their administrative elimination. However, simultaneously with suppression of small scale private output, the advantages of very large scale production were eliminated by the nationally self-enclosed character of the USSR’s economy – a U.S. aircraft manufacturer like Boeing sold into the world market, but a Soviet manufacturer such as Ilyushin could produce aircraft only for the far smaller Soviet economy.

Soviet economists who pointed out these issues were executed by Stalin for doing so, but in any case such criticism appeared "theoretical quibbles" compared to proven Soviet economic success.

After 1945 this dynamic changed. In 1929 the global economy had been collapsing into "autarchic" states or empires. The United States, the British Empire, Japan and Nazi Germany, were cut off from each other by tariff walls. The international monetary system, the Gold Standard, collapsed without replacement. Amid such global economic chaos, the autarchic socialist USSR far outperformed autarchic capitalist economies.

But following World War II, the integrated world economy was gradually rebuilt. A new international payments system, the dollar standard, was created. Tariffs were reduced. The Soviet economy was small compared to this new world economy, and could not be integrated into it without relaxation of its planning system – as global economic fluctuations could not be planned for. Collectivized Soviet agriculture was unproductive and the USSR’s consumer goods of low quality, due to Stalin’s insistence on overwhelming priority to heavy industry – in Stalin’s words: "What does a fast rate of development of industry involve? It involves the maximum capital investment in industry." By the 1970s Soviet economic growth, while more rapid than the United States, was far slower than Japan or South Korea – which were selling into the world market.

But, if the USSR’s economy was heading to crisis, the free market system, its only existing alternative, was by the 1970s showing its own difficulties. After the 1973 "oil price crisis," most developed capitalist economies decelerated dramatically. The United States both slowed and from the early 1980s began the huge debt accumulation which eventually culminated in the 2008 international financial crisis. When the free market model was applied to the former USSR, from 1992 onwards, it led to the greatest economic collapse in a major economy in peacetime in history – Russia’s GDP fell by 30 percent.

Confronted with decisive problems in both dominant economic models, instead of remaining trapped within one or the other, Deng Xiaoping embarked on a policy never previously seen – creation of what is now referred to in China as a "socialist market economy."

In one sense, Deng Xiaoping went from the USSR’s post-1929 model "back to Marx." Underlying Deng Xiaoping’s analysis from 1978, frequently in its literal wording, was Marx’s famous "Critique of the Gotha Programme" – his most extensive commentary on the construction of a socialist society.

To see this close relation here for example is Marx’s analysis: "What we are dealing with… is a communist society, not as it has developed on its own foundations, but… just as it emerges from capitalist society." For a person in such a society: "The same amount of labor which he has given to society in one form, he receives back in another." But: "In a higher phase of communist society… after the productive forces have also increased… society inscribe on its banners: From each according to his abilities, to each according to his needs!"

Deng Xiaoping’s own post-1978 formulation is almost word for word Marx’s: "A Communist society is one in which… there is great material abundance, and the principle of from each according to their ability, to each according to his needs, is applied. It is impossible to apply that principle without overwhelming material wealth. But in the present period in China, before the accumulation of such wealth, the principle was to each according to their labor/work: ‘We must adhere to this socialist principle which calls for distribution according to the quantity and quality of an individual’s work." Deng’s fundamental characterization was: "China is in the primary stage of socialism. Socialism itself is the first stage of communism, and here in China we are still in the primary stage of socialism – that is, the underdeveloped stage. In everything we do we must proceed from this reality, and all planning must be consistent with it."

But while in one sense Deng Xiaoping "returned to Marx," he necessarily had to resolve many problems of a modern economy Marx never envisaged. Purely theoretically, a number of these had been analyzed by Keynes in the 1930s. Keynes’ fundamental conclusion was that investment played the determining role in the economy, "the fluctuations of output… depend almost entirely on the amount of current investment" (Keynes conclusion has since been comprehensively confirmed by statistics). As, in a modern economy, investment is financed by borrowing, Keynes advocated very low interest rates to incentivize investment. But Keynes judged these alone would be insufficient to stably maintain an adequate investment level. It was therefore necessary for the state to play a direct role in setting the level of investment: "I am… skeptical of the success of a merely monetary policy directed towards influencing the rate of interest… I expect to see the state… taking an ever greater responsibility for directly organizing investment." Keynes noted: "I conclude that the duty of ordering the current volume of investment cannot safely be left in private hands."

But if the "the current volume of investment" were to be set, Keynes realized this meant a large state investment role: "I conceive… that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment."

Keynes noted such a "somewhat comprehensive socialization of investment" did not mean eliminating the private sector, but socialized state investment operating together with a private sector: "This need not exclude all manner of compromises and devices by which public authority will co-operate with private initiative… The central controls necessary to ensure full employment will, of course, involve a large extension of the traditional functions of government." Keynes, consequently, envisaged an economy in which a private sector existed but in which the state sector was sufficiently dominant to set overall investment levels.

But Keynes’ analysis remained purely theoretical. It could not be implemented in the West for an insurmountable reason – which is why the West’s "Keynesianism" bears little relation to Keynes’ own writings! Capital investment is "the means of production." If the most basic investment decisions were not taken by private capital, it would no longer be a capitalist society. Keynes had developed an incisive theoretical analysis, but which could not be implemented in the society in which he lived.

Problems which were insurmountable for Keynes were, however, no problem for Deng Xiaoping – as he did not intend to create a capitalist society! To be clear, there is no evidence Deng Xiaoping’s economic concepts were directly influenced by Keynes. But ideas Deng Xiaoping was entirely familiar with from Marx led to the same economic structure as Keynes. The state would retain ownership of large scale (i.e. socialized) economic sectors, thereby giving it the ability to regulate the investment level, while smaller scale economic sectors (non-socialized production) could be released to the private or non-state sector. The state therefore did not need to own the overall economy, just to own enough to set the overall investment level.

This is evidently the policy applied in China from 1978 by the replacement of the rural People’s Communes created in the 1950s (collectivized agriculture) with small scale based farming (the "household responsibility system"). Then the policy known as Zhuada Fangxiao ("keep the large, let go the small") could be embarked on – maintaining large state firms within the state sector and releasing small ones to the non-state/private sector.

Therefore, although a vibrant private sector was created, the state sector was still large enough to set the overall investment level – i.e. the state sector remained dominant. As the Wall Street Journal summarized: "Most economies can pull two levers to bolster growth – fiscal and monetary. China has a third option … accelerate the flow of investment projects." An economic structure envisaged only in theory by Keynes was realized in practice by Deng Xiaoping.

Deng Xiaoping’s economic structure simultaneously solved the problem of diverting resources from heavy industry and creating an abundant supply of consumer products. As the state owned heavy industry, prices in this sector could be controlled, while simultaneously those in agriculture and light consumer industry were liberalized. Relative prices therefore rose in agriculture and consumer industries, resources flowed into these sectors and their output soared. Simultaneously the urban population was protected against initial negative pressures on living standards by these price rises by subsidies financed by reducing China’s armaments expenditure. The extraordinarily rapid growth this structure produced created large scale savings which, in a virtuous circle, could then finance the building of heavy industry on a new basis.

Simultaneously with reintroducing small scale "non-socialized" production, China’s economy pursued international "opening up," allowing it to participate in the largest scale production of all – for the global market.

Therefore, far from Deng Xiaoping’s economic policies being purely pragmatic, they flowed in an integrated fashion from underlying theoretical principles through to the solving of eminently practical issues. It was this which produced by far the greatest economic growth and social advancement seen in any country in world history.

This integrated character of Deng Xiaoping’s economic system also explains why any diversion from it necessarily leads to economic problems. Any return to an administered economy leads to inability to take advantage of small-scale production and to integrate with, and take advantage of, a world economic market. Any system in which private enterprise is dominant loses the ability of the state to set the investment level, and thereby recreates the crises which both Keynes and Deng Xiaoping had successfully solved how to tackle. In short, no other figure in history has ever combined such deep economic thinking with such practically successful economic policy as Deng Xiaoping.

Deng Xiaoping was above all a great leader of the Chinese people. Through pursuit of his country’s national revival, lifting over 620 million people out of poverty, he also made an unparalleled contribution to humanity’s overall well-being.

But if that were not enough, Deng Xiaoping had another achievement. By far the greatest economist of the 20th century was not Keynes, Hayek or Friedman but Deng Xiaoping.

Previous technological innovation has always delivered more long-run employment, not less. But things can change

The Economist, Jan 18th 2014

IN 1930, when the world was “suffering…from a bad attack of economic pessimism”, John Maynard Keynes wrote a broadly optimistic essay, “Economic Possibilities for our Grandchildren”. It imagined a middle way between revolution and stagnation that would leave the said grandchildren a great deal richer than their grandparents. But the path was not without dangers.

One of the worries Keynes admitted was a “new disease”: “technological unemployment…due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.” His readers might not have heard of the problem, he suggested—but they were certain to hear a lot more about it in the years to come.

For the most part, they did not. Nowadays, the majority of economists confidently wave such worries away. By raising productivity, they argue, any automation which economises on the use of labour will increase incomes. That will generate demand for new products and services, which will in turn create new jobs for displaced workers. To think otherwise has meant being tarred a Luddite—the name taken by 19th-century textile workers who smashed the machines taking their jobs.

For much of the 20th century, those arguing that technology brought ever more jobs and prosperity looked to have the better of the debate. Real incomes in Britain scarcely doubled between the beginning of the common era and 1570. They then tripled from 1570 to 1875. And they more than tripled from 1875 to 1975. Industrialisation did not end up eliminating the need for human workers. On the contrary, it created employment opportunities sufficient to soak up the 20th century’s exploding population. Keynes’s vision of everyone in the 2030s being a lot richer is largely achieved. His belief they would work just 15 hours or so a week has not come to pass.

When the sleeper wakes

Yet some now fear that a new era of automation enabled by ever more powerful and capable computers could work out differently. They start from the observation that, across the rich world, all is far from well in the world of work. The essence of what they see as a work crisis is that in rich countries the wages of the typical worker, adjusted for cost of living, are stagnant. In America the real wage has hardly budged over the past four decades. Even in places like Britain and Germany, where employment is touching new highs, wages have been flat for a decade. Recent research suggests that this is because substituting capital for labour through automation is increasingly attractive; as a result owners of capital have captured ever more of the world’s income since the 1980s, while the share going to labour has fallen.

At the same time, even in relatively egalitarian places like Sweden, inequality among the employed has risen sharply, with the share going to the highest earners soaring. For those not in the elite, argues David Graeber, an anthropologist at the London School of Economics, much of modern labour consists of stultifying “bullshit jobs”—low- and mid-level screen-sitting that serves simply to occupy workers for whom the economy no longer has much use. Keeping them employed, Mr Graeber argues, is not an economic choice; it is something the ruling class does to keep control over the lives of others.

Be that as it may, drudgery may soon enough give way to frank unemployment. There is already a long-term trend towards lower levels of employment in some rich countries. The proportion of American adults participating in the labour force recently hit its lowest level since 1978, and although some of that is due to the effects of ageing, some is not. In a recent speech that was modelled in part on Keynes’s “Possibilities”, Larry Summers, a former American treasury secretary, looked at employment trends among American men between 25 and 54. In the 1960s only one in 20 of those men was not working. According to Mr Summers’s extrapolations, in ten years the number could be one in seven.

This is one indication, Mr Summers says, that technical change is increasingly taking the form of “capital that effectively substitutes for labour”. There may be a lot more for such capital to do in the near future. A 2013 paper by Carl Benedikt Frey and Michael Osborne, of the University of Oxford, argued that jobs are at high risk of being automated in 47% of the occupational categories into which work is customarily sorted. That includes accountancy, legal work, technical writing and a lot of other white-collar occupations.

Answering the question of whether such automation could lead to prolonged pain for workers means taking a close look at past experience, theory and technological trends. The picture suggested by this evidence is a complex one. It is also more worrying than many economists and politicians have been prepared to admit.

The lathe of heaven

Economists take the relationship between innovation and higher living standards for granted in part because they believe history justifies such a view. Industrialisation clearly led to enormous rises in incomes and living standards over the long run. Yet the road to riches was rockier than is often appreciated.

In 1500 an estimated 75% of the British labour force toiled in agriculture. By 1800 that figure had fallen to 35%. When the shift to manufacturing got under way during the 18th century it was overwhelmingly done at small scale, either within the home or in a small workshop; employment in a large factory was a rarity. By the end of the 19th century huge plants in massive industrial cities were the norm. The great shift was made possible by automation and steam engines.

Industrial firms combined human labour with big, expensive capital equipment. To maximise the output of that costly machinery, factory owners reorganised the processes of production. Workers were given one or a few repetitive tasks, often making components of finished products rather than whole pieces. Bosses imposed a tight schedule and strict worker discipline to keep up the productive pace. The Industrial Revolution was not simply a matter of replacing muscle with steam; it was a matter of reshaping jobs themselves into the sort of precisely defined components that steam-driven machinery needed—cogs in a factory system.

The way old jobs were done changed; new jobs were created. Joel Mokyr, an economic historian at Northwestern University in Illinois, argues that the more intricate machines, techniques and supply chains of the period all required careful tending. The workers who provided that care were well rewarded. As research by Lawrence Katz, of Harvard University, and Robert Margo, of Boston University, shows, employment in manufacturing “hollowed out”. As employment grew for highly skilled workers and unskilled workers, craft workers lost out. This was the loss to which the Luddites, understandably if not effectively, took exception.

With the low-skilled workers far more numerous, at least to begin with, the lot of the average worker during the early part of this great industrial and social upheaval was not a happy one. As Mr Mokyr notes, “life did not improve all that much between 1750 and 1850.” For 60 years, from 1770 to 1830, growth in British wages, adjusted for inflation, was imperceptible because productivity growth was restricted to a few industries. Not until the late 19th century, when the gains had spread across the whole economy, did wages at last perform in line with productivity (see chart 1).

Along with social reforms and new political movements that gave voice to the workers, this faster wage growth helped spread the benefits of industrialisation across wider segments of the population. New investments in education provided a supply of workers for the more skilled jobs that were by then being created in ever greater numbers. This shift continued into the 20th century as post-secondary education became increasingly common.

Claudia Goldin, an economist at Harvard University, and Mr Katz have written that workers were in a “race between education and technology” during this period, and for the most part they won. Even so, it was not until the “golden age” after the second world war that workers in the rich world secured real prosperity, and a large, property-owning middle class came to dominate politics. At the same time communism, a legacy of industrialisation’s harsh early era, kept hundreds of millions of people around the world in poverty, and the effects of the imperialism driven by European industrialisation continued to be felt by billions.

The impacts of technological change take their time appearing. They also vary hugely from industry to industry. Although in many simple economic models technology pairs neatly with capital and labour to produce output, in practice technological changes do not affect all workers the same way. Some find that their skills are complementary to new technologies. Others find themselves out of work.

Take computers. In the early 20th century a “computer” was a worker, or a room of workers, doing mathematical calculations by hand, often with the end point of one person’s work the starting point for the next. The development of mechanical and electronic computing rendered these arrangements obsolete. But in time it greatly increased the productivity of those who used the new computers in their work.

Many other technical innovations had similar effects. New machinery displaced handicraft producers across numerous industries, from textiles to metalworking. At the same time it enabled vastly more output per person than craft producers could ever manage.

Player piano

For a task to be replaced by a machine, it helps a great deal if, like the work of human computers, it is already highly routine. Hence the demise of production-line jobs and some sorts of book-keeping, lost to the robot and the spreadsheet. Meanwhile work less easily broken down into a series of stereotyped tasks—whether rewarding, as the management of other workers and the teaching of toddlers can be, or more of a grind, like tidying and cleaning messy work places—has grown as a share of total employment.

But the “race” aspect of technological change means that such workers cannot rest on their pay packets. Firms are constantly experimenting with new technologies and production processes. Experimentation with different techniques and business models requires flexibility, which is one critical advantage of a human worker. Yet over time, as best practices are worked out and then codified, it becomes easier to break production down into routine components, then automate those components as technology allows.

If, that is, automation makes sense. As David Autor, an economist at the Massachusetts Institute of Technology (MIT), points out in a 2013 paper, the mere fact that a job can be automated does not mean that it will be; relative costs also matter. When Nissan produces cars in Japan, he notes, it relies heavily on robots. At plants in India, by contrast, the firm relies more heavily on cheap local labour.

Even when machine capabilities are rapidly improving, it can make sense instead to seek out ever cheaper supplies of increasingly skilled labour. Thus since the 1980s (a time when, in America, the trend towards post-secondary education levelled off) workers there and elsewhere have found themselves facing increased competition from both machines and cheap emerging-market workers.

Such processes have steadily and relentlessly squeezed labour out of the manufacturing sector in most rich economies. The share of American employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%. At the same time, jobs in services soared, from less than 50% of employment to almost 70% (see chart 2). It was inevitable, therefore, that firms would start to apply the same experimentation and reorganisation to service industries.

A new wave of technological progress may dramatically accelerate this automation of brain-work. Evidence is mounting that rapid technological progress, which accounted for the long era of rapid productivity growth from the 19th century to the 1970s, is back. The sort of advances that allow people to put in their pocket a computer that is not only more powerful than any in the world 20 years ago, but also has far better software and far greater access to useful data, as well as to other people and machines, have implications for all sorts of work.

The case for a highly disruptive period of economic growth is made by Erik Brynjolfsson and Andrew McAfee, professors at MIT, in “The Second Machine Age”, a book to be published later this month. Like the first great era of industrialisation, they argue, it should deliver enormous benefits—but not without a period of disorienting and uncomfortable change. Their argument rests on an underappreciated aspect of the exponential growth in chip processing speed, memory capacity and other computer metrics: that the amount of progress computers will make in the next few years is always equal to the progress they have made since the very beginning. Mr Brynjolfsson and Mr McAfee reckon that the main bottleneck on innovation is the time it takes society to sort through the many combinations and permutations of new technologies and business models.

A startling progression of inventions seems to bear their thesis out. Ten years ago technologically minded economists pointed to driving cars in traffic as the sort of human accomplishment that computers were highly unlikely to master. Now Google cars are rolling round California driver-free no one doubts such mastery is possible, though the speed at which fully self-driving cars will come to market remains hard to guess.

Brave new world

Even after computers beat grandmasters at chess (once thought highly unlikely), nobody thought they could take on people at free-form games played in natural language. Then Watson, a pattern-recognising supercomputer developed by IBM, bested the best human competitors in America’s popular and syntactically tricksy general-knowledge quiz show “Jeopardy!” Versions of Watson are being marketed to firms across a range of industries to help with all sorts of pattern-recognition problems. Its acumen will grow, and its costs fall, as firms learn to harness its abilities.

The machines are not just cleverer, they also have access to far more data. The combination of big data and smart machines will take over some occupations wholesale; in others it will allow firms to do more with fewer workers. Text-mining programs will displace professional jobs in legal services. Biopsies will be analysed more efficiently by image-processing software than lab technicians. Accountants may follow travel agents and tellers into the unemployment line as tax software improves. Machines are already turning basic sports results and financial data into good-enough news stories.

Jobs that are not easily automated may still be transformed. New data-processing technology could break “cognitive” jobs down into smaller and smaller tasks. As well as opening the way to eventual automation this could reduce the satisfaction from such work, just as the satisfaction of making things was reduced by deskilling and interchangeable parts in the 19th century. If such jobs persist, they may engage Mr Graeber’s “bullshit” detector.

Being newly able to do brain work will not stop computers from doing ever more formerly manual labour; it will make them better at it. The designers of the latest generation of industrial robots talk about their creations as helping workers rather than replacing them; but there is little doubt that the technology will be able to do a bit of both—probably more than a bit. A taxi driver will be a rarity in many places by the 2030s or 2040s. That sounds like bad news for journalists who rely on that most reliable source of local knowledge and prejudice—but will there be many journalists left to care? Will there be airline pilots? Or traffic cops? Or soldiers?

There will still be jobs. Even Mr Frey and Mr Osborne, whose research speaks of 47% of job categories being open to automation within two decades, accept that some jobs—especially those currently associated with high levels of education and high wages—will survive (see table). Tyler Cowen, an economist at George Mason University and a much-read blogger, writes in his most recent book, “Average is Over”, that rich economies seem to be bifurcating into a small group of workers with skills highly complementary with machine intelligence, for whom he has high hopes, and the rest, for whom not so much.

And although Mr Brynjolfsson and Mr McAfee rightly point out that developing the business models which make the best use of new technologies will involve trial and error and human flexibility, it is also the case that the second machine age will make such trial and error easier. It will be shockingly easy to launch a startup, bring a new product to market and sell to billions of global consumers (see article). Those who create or invest in blockbuster ideas may earn unprecedented returns as a result.

In a forthcoming book Thomas Piketty, an economist at the Paris School of Economics, argues along similar lines that America may be pioneering a hyper-unequal economic model in which a top 1% of capital-owners and “supermanagers” grab a growing share of national income and accumulate an increasing concentration of national wealth. The rise of the middle-class—a 20th-century innovation—was a hugely important political and social development across the world. The squeezing out of that class could generate a more antagonistic, unstable and potentially dangerous politics.

The potential for dramatic change is clear. A future of widespread technological unemployment is harder for many to accept. Every great period of innovation has produced its share of labour-market doomsayers, but technological progress has never previously failed to generate new employment opportunities.

The productivity gains from future automation will be real, even if they mostly accrue to the owners of the machines. Some will be spent on goods and services—golf instructors, household help and so on—and most of the rest invested in firms that are seeking to expand and presumably hire more labour. Though inequality could soar in such a world, unemployment would not necessarily spike. The current doldrum in wages may, like that of the early industrial era, be a temporary matter, with the good times about to roll (see chart 3).

These jobs may look distinctly different from those they replace. Just as past mechanisation freed, or forced, workers into jobs requiring more cognitive dexterity, leaps in machine intelligence could create space for people to specialise in more emotive occupations, as yet unsuited to machines: a world of artists and therapists, love counsellors and yoga instructors.

Such emotional and relational work could be as critical to the future as metal-bashing was in the past, even if it gets little respect at first. Cultural norms change slowly. Manufacturing jobs are still often treated as “better”—in some vague, non-pecuniary way—than paper-pushing is. To some 18th-century observers, working in the fields was inherently more noble than making gewgaws.

But though growth in areas of the economy that are not easily automated provides jobs, it does not necessarily help real wages. Mr Summers points out that prices of things-made-of-widgets have fallen remarkably in past decades; America’s Bureau of Labour Statistics reckons that today you could get the equivalent of an early 1980s television for a twentieth of its then price, were it not that no televisions that poor are still made. However, prices of things not made of widgets, most notably college education and health care, have shot up. If people lived on widgets alone— goods whose costs have fallen because of both globalisation and technology—there would have been no pause in the increase of real wages. It is the increase in the prices of stuff that isn’t mechanised (whose supply is often under the control of the state and perhaps subject to fundamental scarcity) that means a pay packet goes no further than it used to.

So technological progress squeezes some incomes in the short term before making everyone richer in the long term, and can drive up the costs of some things even more than it eventually increases earnings. As innovation continues, automation may bring down costs in some of those stubborn areas as well, though those dominated by scarcity—such as houses in desirable places—are likely to resist the trend, as may those where the state keeps market forces at bay. But if innovation does make health care or higher education cheaper, it will probably be at the cost of more jobs, and give rise to yet more concentration of income.

The machine stops

Even if the long-term outlook is rosy, with the potential for greater wealth and lots of new jobs, it does not mean that policymakers should simply sit on their hands in the mean time. Adaptation to past waves of progress rested on political and policy responses. The most obvious are the massive improvements in educational attainment brought on first by the institution of universal secondary education and then by the rise of university attendance. Policies aimed at similar gains would now seem to be in order. But as Mr Cowen has pointed out, the gains of the 19th and 20th centuries will be hard to duplicate.

Boosting the skills and earning power of the children of 19th-century farmers and labourers took little more than offering schools where they could learn to read, write and do algebra. Pushing a large proportion of college graduates to complete graduate work successfully will be harder and more expensive. Perhaps cheap and innovative online education will indeed make new attainment possible. But as Mr Cowen notes, such programmes may tend to deliver big gains only for the most conscientious students.

Another way in which previous adaptation is not necessarily a good guide to future employment is the existence of welfare. The alternative to joining the 19th-century industrial proletariat was malnourished deprivation. Today, because of measures introduced in response to, and to some extent on the proceeds of, industrialisation, people in the developed world are provided with unemployment benefits, disability allowances and other forms of welfare. They are also much more likely than a bygone peasant to have savings. This means that the “reservation wage”—the wage below which a worker will not accept a job—is now high in historical terms. If governments refuse to allow jobless workers to fall too far below the average standard of living, then this reservation wage will rise steadily, and ever more workers may find work unattractive. And the higher it rises, the greater the incentive to invest in capital that replaces labour.

Everyone should be able to benefit from productivity gains—in that, Keynes was united with his successors. His worry about technological unemployment was mainly a worry about a “temporary phase of maladjustment” as society and the economy adjusted to ever greater levels of productivity. So it could well prove. However, society may find itself sorely tested if, as seems possible, growth and innovation deliver handsome gains to the skilled, while the rest cling to dwindling employment opportunities at stagnant wages.

From the print edition: Briefing

By W. I. ROBINSON

University of California, Santa Barbara, CA, USA

ABSTRACT This article analyzes and theorizes the global crisis from the perspective of global capitalism theory. The crisis is unprecedented, given its magnitude, its global reach, the extent of ecological degradation and social deterioration, and the scale of the means of violence. If we are to avert disastrous outcomes, we must understand the nature of the new global capitalism as well as its crisis. The system-wide crisis will not be a repeat of earlier such episodes of crisis in the 1930s and the 1970s precisely because world capitalism is fundamentally different in the early twenty-first century. Among the qualitative shifts in the global system this article highlights are: (1) the rise of truly transnational capital and the integration of every country into a new globalized production and financial system; (2) the appearance of a transnational capitalist class; (3) the rise of transnational state apparatuses; (4) and the appearance of novel relations of inequality and domination in global society. The current crisis shares several aspects with earlier structural crises of the 1970s and the 1930s but also several features unique to the present: (1) the system is fast reaching the ecological limits of its reproduction; (2) the unprecedented magnitude of the means of violence and social control, as well as the concentrated control over the means of global communications and the production and circulation of symbols; (3) limits to the extensive and intensive expansion of capitalism; (4) the rise of a vast surplus population inhabiting a ‘planet of slums’; (5) the disjuncture between a globalizing economy and a nation-state based system of political authority. The discussion draws on theories of over-accumulation and legitimization crises. It shows how in the face of stagnation pressures, the system turned to three mechanisms at the turn of the century to sustain the global economy: militarized accumulation, frenzied worldwide financial speculation, and the raiding and sacking of public budgets. The article discusses how diverse social and political forces are responding to the crisis, explores alternative scenarios for the future, and warns of the danger of a ‘twenty-first century fascism’. Finally, the article examines the role of organic intellectuals in public interpretations of the crisis and possible solutions.

Correspondence Address: William I. Robinson, Department of Sociology, University of California Santa Barbara, Santa Barbara, CA 93106 – 9430, USA. Email: wirobins@soc.ucsb.edu, # 2013 Taylor & Francis

I have been writing about world capitalism since the 1980s, about globalization since the early1990s, and about the notion of a transnational capitalist class (TCC) and transnational state (TNS) apparatuses since the late 1990s, as part of a broader collective research agenda in what some of us have referred to as the global capitalism school (see, inter alia, Robinson, 1996a, 1996b, 1998, 2004, 2005, 2007, 2008; Robinson and Harris, 2000). This work has put me in touch with a network of friends and colleagues also researching these matters, among them Leslie Sklair, Bill Carroll, Jerry Harris, and Georgina Murray. My thoughts on globalization have congealed over the past decade into a more synthetic theory of global capitalism as a new epoch in the ongoing and open-ended evolution of world capitalism, characterized by novel articulations of transnational social power, as laid out most explicitly in Robinson (2004) and Robinson (2008, ch. 1). Here I want to place the matter of such social power in the context of the global crisis. The fact is, our world is burning; we are facing a global crisis of unprecedented scale and proportions. In my view our very survival is at risk. The most urgent task of any intellectual who considers him/herself organic is to address this crisis—in our intellectual production and in our social activity.

This crisis, I reiterate, is unprecedented, given its magnitude, its global reach, the extent of ecological degradation and social deterioration, and the scale of the means of violence. We truly face a crisis of humanity. The stakes have never been higher. We have entered a period of great upheavals, momentous changes, and uncertainties, fraught with dangers if also opportunities. We now confront the growing threat of ecological collapse and of what I refer to as twenty-first century fascism as one of several political responses to crisis. If we are to avert such outcomes we must understand both the nature of the new global capitalism and the nature of its crisis. I aspire here to analyze and theorize the global crisis from the perspective of global capitalism theory. This perspective offers a powerful explanatory framework for making sense of the crisis. Following Marx, we want to focus on the internal dynamics of capitalism to understand the crisis, and following the global capitalism perspective we should look for how capitalism has qualitatively evolved in recent decades. The system-wide crisis we face will not be a repeat of earlier such episodes in the 1930s or 1970s precisely because world capitalism is fundamentally different in the early twenty-first century.

How specifically, is world capitalism different now than during previous episodes of crisis? There have been several qualitative shifts in capitalism that I have highlighted elsewhere (see, inter alia, the works referenced above) that here we can summarize as follows:

(1) The rise of truly transnational capital and the integration of every country into a new globalized production and financial system. This represents a transition from a world economy, in which countries and regions were linked to each other via trade and financial flows in an integrated international market, to a global economy, characterized by global circuits of accumulation, that is, transnational production and a single globally integrated financial system. This is a new global economic structure.

(2) The appearance of a new TCC, a class group embedded in new global circuits of accumulation rather than national circuits. As a class group the TCC has drawn in contingents from most countries around the world, North and South, and has attempted to position itself as a global ruling class. This TCC represents the hegemonic fraction of capital on a world scale.

(3) The rise of TNS apparatuses, loose networks composed of supranational political and economic institutions and of national state apparatuses that have been penetrated and transformed by transnational forces. The TNS functions to organize the conditions for transnational accumulation and through which the TCC attempts to organize and institutionally exercise its class power.

(4) The appearance of novel relations of inequality, domination, and exploitation in global society, including an increasing importance of transnational social and class inequalities relative to North – South inequalities that are geographically or territorially conceived.

I have been focusing in recent years on the occurrence and significance of accumulation and legitimization crises in the global system. It is clear that the collapse of the global financial system in 2008, what some called the Great Recession, was merely the straw that broke the camel’s back. This is not a cyclical but a structural crisis, a ‘restructuring crisis’, such as we experienced in the 1970s and before that in the 1930s (and even before that, in the 1870s). Cyclical crises are recurrent to capitalism about once every 10 years and involve recessions that act as self-correcting mechanisms without any major restructuring of the system. The recessions of the early 1980s, the early 1990s, and of 2001 were cyclical crises. Structural crises reflect deeper contradictions that can only be resolved by a major restructuring of the system. The crisis of the 1970s was a structural crisis that was resolved through capitalist globalization. And prior to that, the 1930s was a structural crisis that was resolved through the creation of a new model of Fordist – Keynesian or redistributive capitalism. This twenty-first century crisis has the potential to develop into a systemic crisis. A systemic crisis involves the replacement of a system by an entirely new system or by an outright collapse. A structural crisis opens up the possibility for a systemic crisis. But if it actually snowballs into a systemic crisis—in this case, if it gives way either to capitalism being superseded or to a breakdown of global civilization—is not predetermined and depends entirely on the response of social and political forces to the crisis and on historical contingencies that are not easy to forecast. This is a historic moment of extreme uncertainty, in which collective responses to the crisis from distinct social and class forces are in great flux.

The twenty-first century global crisis shares a number of aspects with earlier structural crises of the world economy of the 1970s and the 1930s, but there are also several features unique to the present. One is that the system is fast reaching the ecological limits of its reproduction. The world capitalist system is a truly global system and the transformations in natural systems brought about by human activity have now begun, in the words of ecologist Peter Vitousek, to ‘alter the structure and function of Earth as a system’ (as cited in Foster et al., 2010, p. 35). The ecological holocaust underway cannot be underestimated: peak oil, climate change, the extinction of species, the collapse of centralized agricultural systems in several regions of the world, and so on. According to leading environmental scientists, there are nine ‘planetary boundaries’ crucial to maintaining an earth system environment in which humans can exist, four of which are experiencing at this time the onset of irreversible environmental degradation and three of which (climate change, the nitrogen cycle, and biodiversity loss) are at ‘tipping points’, meaning that these processes have already crossed their planetary boundaries (see Foster et al., 2010, p. 14).

Another is that the magnitude of the means of violence and social control is unprecedented, as is the concentration of the means of global communication and symbolic production in the hands of a very few powerful groups. Computerized wars, drones, bunker-buster bombs, global surveillance, biometrics, data mining systems, star wars, and so forth have changed the face of warfare. Warfare has become normalized and sanitized for those not directly at the receiving end of armed aggression in this age of warfare as spectacle and asymmetric warfare, in which one side has overwhelming superior strength and the also the ability to control public perceptions of conflicts. At the same time, we have arrived at the panoptical surveillance society and the age of thought control by those who control global flows of communication and symbolic pro- duction (for discussion on these matters, see, inter alia Barkawi, 2005; Gilliom and Monahan, 2012; Graham, 2010; Hirst, 2011; Mattelart, 2010).

A third is that capitalism is reaching apparent limits to its extensive expansion. There are no longer any new territories of significance that can be integrated into world capitalism, de-ruralization is now well advanced, and the commodification of the countryside and of pre- and non- capitalist spaces has intensified, that is, converted in hot-house fashion into spaces of capital, so that intensive expansion is reaching depths never before seen. Capitalism must continually expand or collapse. How or where will it now expand?

A fourth is the rise of a vast surplus population inhabiting, to use the phrase coined by Mike Davis (2007), a ‘planet of slums’, dispossessed yet locked out of the productive economy, thrown into the margins, and subject to sophisticated systems of social control and to destruction—to a mortal cycle of dispossession – exploitation – exclusion. Proletarianization worldwide has accelerated through new waves of primitive accumulation as billions of people have been dispossessed and thrown into the global labor market. The global wage labor force doubled from some 1.5 billion in 1980 to some 3 billion in 2006 (Freeman, 2005). Yet those uprooted and dispossessed have not been absorbed into formal employment. The International Labor Organization (ILO, 1997) reported that at the end of century one-third of the world’s economically active population was unemployed—that is, idle labor, or what Davis terms the ‘outcast proletariat’ found in the world’s megacities; by the late 1990s, as Davis points out, for the first time in human history the urban population of the earth outnumbered the rural population. Fifth, there is a disjuncture between a globalizing economy and a nation-state based system of political authority. TNS apparatuses are incipient and have not been able to play the role of what social scientists refer to as a ‘hegemon’, or a leading nation-state that has enough power and authority to organize and stabilize the system (Robinson, 2004, 2007, 2008).

Development of the Crisis

Let us review how the crisis has developed and what it tells us about global capitalism and global society.

Emergent transnational capital underwent a major expansion in the 1980s and 1990s, involving: hyper-accumulation through new technologies such as computerization and informatics; neoliberal policies; and new modalities of mobilizing and exploiting the global labor force, including the flexibilization and casualization of labor and a massive new round of primitive accumulation, displacing hundreds of millions of people, especially in the Third World country- side, who became internal and international migrants. But hyper-accumulation was followed by renewed stagnation in the late 1990s as the system faced a new round of crisis. Sharp social polarization and escalating inequalities worldwide fueled the chronic problem of over-accumulation of capital. The concentration of the planet’s wealth in the hands of a few and the accelerated impoverishment and dispossession of the majority has been extreme under capitalist globalization.1 This pauperization of broad majorities has meant that transnational capital cannot find productive outlets to unload the enormous amounts of surplus it has accumulated; ceteris paribus, global output has expanded as the global market has contracted. By the twenty-first century the TCC turned to several mechanisms to sustain global accumulation in the face of over-accumulation.

What were these mechanisms? One is militarized accumulation. Making wars and undertaking interventions unleash cycles of destruction and reconstruction, and generate enormous profits for an ever-expanding military – prison – industrial – security – financial complex. We are now living in a global war economy that goes beyond such ‘hot’ wars as in Iraq and Afghanistan. A second is the raiding and sacking of public budgets. The TCC uses its financial powers to take control of state finances and to impose further austerity on the working majority. It employs its structural power to attempt to accelerate the dismantling of what remains of the social wage and welfare states. And a third is frenzied worldwide financial speculation. This involves turning the global economy into a giant casino. The TCC has unloaded trillions of dollars into speculation in housing and real estate markets, food, energy, and other global commodities markets, into bond markets worldwide (that is, public budgets and state finances), and into every imaginable

‘derivative’, ranging from hedge funds to swaps, futures markets, collateralized debt obligations, asset pyramiding, and Ponzi schemes. The extent of such speculation in fictitious value defies logic and the imagination: in 2006 financial markets were trading more in a month than the annual gross domestic product of the entire world (Graham, 2010, p. 4)!

Elsewhere I have discussed at some length how these three mechanisms have played them- selves out since the turn of the twenty-first century (see, inter alia, Robinson, 2007, 2008, 2010, 2011, 2012, forthcoming; Robinson and Barrera, 2012). The key questions I want to

pose here are: Where is this crisis headed? What are the possible outcomes? What does all this tell us about global capitalism and also about the prospects for confronting global capitalism?

How has the TCC responded to the crisis, both in terms of its direct class interests, and in pol- itical terms, that is, in terms of its relationship to political processes at the national and transna- tional levels? In fact, the TCC has used the crisis to pursue its class interests aggressively. Historically, dominant groups attempt to transfer the cost of crisis onto the mass of popular and working classes and in turn these classes resist such attempts. This appears to be the global political moment. Transnational capital and its political agents have attempted to resolve the structural crisis by effecting a vast shift in the balance of class and social forces worldwide in its favor, in an effort to deepen many times over and to consummate the ‘neoliberal counterrevolution’ that began in the 1980s. Here, ‘resolved’ does not mean that things get better for the mass of humanity but that there is a resumption of sustained accumulation. Europe and the United States now face the same neoliberal policies that have been imposed on the Global South since the 1980s.

While transnational capital’s offensive against the global working class dates back to the crisis of the 1970s and has grown in intensity ever since, the 2008 financial collapse and the ‘Great Recession’ that followed was, in several respects, a major turning point. The multi-billionaire Warren Buffett, chairman of Berkshire Hathaway, and one of the richest men in the world, famously stated in 2006 that ‘There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning’ (as cited in Carroll, 2010, p. 1). In fact, the global crisis provided the TCC with an opportunity to intensify this war. As the crisis spread it generated conditions worldwide for new rounds of massive austerity, including a greater flexibilization of labor, slashing the social wage, speed-ups, and so on. The crisis allowed the money mandarins of global capitalism and their political agents to squeeze more value out of labor—directly, through more intensified exploitation, and indirectly, through state finances. Social and political conflict escalated around the world in the wake of 2008, including repeated rounds of national strikes and mass mobilizations in the European Union, uprisings in North Africa and the Middle East, and so on.

Although TNS apparatuses failed to intervene to impose regulations on global finance capital they did intervene to impose the costs of devalorization on global labor. Crises, moreover, provide capital with the opportunity to accelerate the process of forcing greater productivity out of fewer workers. According to one press report, the largest employers in the United States, for instance, ‘have emerged from the economy’s harrowing downturn loaded with cash thanks to deep cost-cutting that helped drive unemployment into double digits. . . . and [resulted in] huge gains in worker productivity’ (Petruno, 2010, p. A1).

Apart from the massive devalorizations of 2007 and 2008, the crisis has therefore involved less a devalorization of capital than a further transfer of wealth from labor to transnational capital and has set the stage for a new round of deep austerity. The crisis has in part been dis- placed to state budgets—bailouts, austerity, deficits, etc.—yet this needs to be seen in terms of class relations. The bailouts of transnational capital represent in themselves a transfer of the devaluation of capital onto labor. The budgetary and fiscal crises that supposedly justify spend- ing cuts and austerity are a matter of political decisions; they are contrived, literally. They are a consequence of the unwillingness or inability of states to challenge capital and their disposition to transfer the burden of the crisis to working and popular classes. Mass unemployment, foreclo- sures, the further erosion of social wages, wage cuts, furloughs, the increased exploitation of part-time workers, reduced work hours, informalization, and mounting debt peonage—including capital’s claim to the future wages of workers through public debt—are some of capital’s trans- fer mechanisms. Unless there is effective resistance, global capital is likely to make permanent the further flexibilization of labor and other concessions it is wringing out of workers through the crisis.

It seems clear that transnational finance capital was able to privately appropriate state bailouts and turn them into super profits. In 2009 Wall Street reported a resumption of massive profits, even in the midst of severe recession and low levels of consumption, a decline in productive investment, and a sharp rise in unemployment. By 2010 global corporations were registering record profits and corporate income escalated. After suffering losses in 2008, the top 25 hedge-fund managers were paid, on average, more than $1 billion each in 2009, eclipsing the record they had set in pre-recession 2007 (Freeland, 2011, p. 4). The Dow Jones, which had dropped from 14,000 to 6,500 in late 2008 and early 2009, rose to 13,000 in early 2012. In the United States, corporate profits in 2011 hit their highest level since 1950. Between 2008 and 2011, 88% of national income growth in the United States went to corporate profits while just 1% went to wages. In comparison, in the recovery from the 2000 – 2001 recession, 15% of income growth went to wages and salaries while 53% went to corporate profits, and in the recovery that began in 1991 50% of the growth in national income went to wages and salaries while corporate profits actually fell by 1% (Greenhouse, 2011). According to Federal Reserve data from late 2010, companies in the United States held $1.8 trillion in cash, more than it had at any time since 1956 (at adjusted prices) in uninvested cash—a powerful indicator of the persistence of over-accumulation (as cited in Parenti, 2011, pp. 228 – 9).

Here I want to comment further on a new structural feature of global capitalism, the rise of‘surplus humanity’, a mass of hundreds of millions, if not billions, of people who constitute a group distinct from the earlier ‘reserve army of labor’ about which Marx wrote. This rise of such a mass has major implications for political projects, both hegemonic and counter-hegemo- nic. As I have noted, the process of achieving greater productivity with fewer workers has accel- erated under globalization. The newfound mobility of transnational capital and new forms of spatial organization has allowed it to break free from earlier nation-state constraints to unbridled accumulation—that is, the power and ability of working and popular classes to impose those constraints within the bounds of the nation-state. Spatial reorganization helps transnational capital to break the power of territorially bound labor and to impose new sets of capital – labor relations based on fragmentation, flexibilization, intense discipline regimes, and the cheap- ening of labor, together with new forms of social control and reproduction. This is combined with a massive new round of primitive accumulation and displacement that has given rise to a global army of superfluous labor, to the marginalization of some one-third of humanity that has been dispossessed from the means of production, locked out of productive participation in the global economy, dehumanized, and subject to new forms of social control and repression—what I referred to earlier as a mortal cycle of dispossession – exploitation – exclusion. Iwill come back momentarily to the matter of surplus humanity.

Responses to the Crisis

Apart from the TCC, how have social and political forces worldwide responded to the crisis? Clearly, the crisis is resulting in a rapid political polarization of global society. Both left- and right-wing forces appear to be insurgent. There are three identifiable responses that are in dispute:

The first is reformism from above aimed at stabilizing the system, at saving it from itself and

from more radical responses from below. Transnational reformist-oriented elites have proposed regulating global financial markets, state stimulus programs, fomenting a shift from speculation to productive accumulation, and limited redistributive measures. Elites such as George Soros, Jeffrey Sacks, and Joseph Stiglitz, as well as representatives from the international financial institutions and some governments are now guided less by neoclassical than institutional econ- omics and pursue a ‘global neo-Keynesianism’.2 Nonetheless, in the years following the 2008 collapse it seems that these reformers have been unable, or unwilling, to prevail over the power of transnational finance capital. Moreover, such powerful transnational capitalists as Warren Buffett and Carlos Slim have advanced reformist – redistributive discourses, but their eagerness to take advantage of the crisis to make profits prevents them from playing a significant reformist role.

A second response is popular, grassroots, and leftist resistance from below. This resistance appears to be insurgent in the wake of 2008 yet spread very unevenly across countries and regions. Reflecting this insurgency are: mass uprisings in EU countries in the wake of the sover- eign debt crisis and the imposition of draconian new austerity programs; uprising in North Africa and the Middle East; the turn to the left in Latin America; the revival of labor militancy in the United States and the Occupy Movement; a major escalation of strike activity in China; and so on (on the global revolts, see inter alia Mason, 2012; and on Latin America in particular, see Robinson, 2008).

A third response is twenty-first century fascism. The ultra-right is an insurgent force in many countries. In Latin America, a neo-fascist right is present in Colombia, Honduras, and Mexico. In the EU and the United States, such groups as the Tea Party, Christian fundamentalism, skin- heads, the anti-immigrant movement, and so on are on the rise. My fear is that if reformism from above fails and popular and leftist forces are not able to seize the initiative then the road may become open for a twenty-first century fascism. The proto-fascist right seeks to fuse reactionary political power with transnational capital and to organize a mass base among historically privileged sectors of the global working class—such as white workers in the North and middle layers in the South—that are now experiencing heightened insecurity and the specter of downward mobility. The proto-fascist response has involved militarism, extreme masculinization, racism, the search for scapegoats (such as immigrant workers and Muslims in the United States and Europe), and mystifying ideologies, often involving race/ culture supremacy and xenophobia, embracing an idealized and mythical past, as well as racist mobilization against scapegoats. We should recall that fascism is a particular response to capitalist crisis, one that seeks to contain any challenge to crisis that may come from subordinate groups (for further discussion, see Robinson and Barrera, 2012, and Robinson, forthcoming, ch. 5).

It is in this regard that we must now return to the matter of surplus humanity. What has taken place through capitalist globalization is the severing of the logic of accumulation from that of social reproduction. Central to the story of global capitalism and crisis, as well as to the specter of neo-fascism, is the mass of humanity that has been expropriated from the means of survival yet also expelled from capitalist production as global supernumeraries or surplus labor, relegated to scraping by in a ‘planet of slums’ and subject to all-pervasive and ever- more sophisticated and repressive social control systems. From the vantage point of dominant groups, the challenge is: how to contain the mass of supernumeraries, the marginalized, and the resistance of downwardly mobile majorities?

We are witnessing transitions from social welfare to social control states. The need for dominant groups around the world to assure widespread, organized, mass social control of the world’s surplus population of rebellious forces from below gives a powerful impulse to a project of twenty-first century global fascism. Simply put, the immense structural inequalities of the global political economy cannot easily be contained through consensual mechanisms of social control, that is, through hegemonic domination.

There is an explosive growth of social inequality and intensified crises of survival for billions of people around the world. This involves the breakdown of the social fabric at the same time as the state’s ability to function as a ‘factor of cohesion’ (Poulantzas, 1968) within the social order breaks down to the extent that capitalism has globalized and the logic of accumulation or com- modification penetrates every aspect of social life—the ‘life world’ itself. As a result, ‘cohesion’ requires more and more social control in the face of the collapse of the social fabric.

The inability of national states to meet the contradictory functions of accumulation and legit- imization means that economic crisis intensifies the problem of legitimization for dominant groups, so that accumulation crises appear as spiraling political crises; ‘governability’ becomes more and more elusive. States resort to a host of mechanisms of coercive exclusion, among them: legal changes to criminalize the excluded—often racialized—and to subject them to mass incarceration and the punitive whip of prison – industrial complexes; repressive anti-immigrant legislation; manipulation of space in new ways so that both gated communities and slums are controlled by armies of private security guards and technologically advanced sur- veillance systems; ubiquitous, often para-militarized policing; mobilization of the culture indus- tries and state ideological apparatuses to dehumanize victims of global capitalism as dangerous, depraved, and culturally degenerate; ideological campaigns aimed at seduction and passivity through petty consumption and a flight into fantasy. This last aspect is crucial: the culture of global capitalism attempts to seduce the excluded and to channel their frustrated aspirations into petty consumption and fantasy as an alternative to placing political demands on the system through collective mobilization.

All this provides fertile bases for projects of twenty-first century fascism. Images of what such a political project would involve span from: the late 2008/early 2009 Israeli invasion of Gaza and its ongoing ethnic cleansing of the Palestinians; the scapegoating and criminalization of immigrant workers in the United States, Europe, Australia, and many other countries; genocide in the Congo; the spread of neo-Nazis and skinheads in Europe; the UN/US occupation of Haiti and the Indian occupation of Kashmir; the trashing of Somalia; and the explosive spread of the Tea Party and far-right Christian fundamentalism in the United States.

With regard to the TCC, I believe we can identify three sectors of capital in particular that stand out as most aggressive in pursuing accumulation strategies that make them most prone to supporting or even promoting neo-fascist political arrangements. These are: speculative finance capital; the military – industrial – prison – security complex; the extractive and energy complexes. Capital accumulation in the military – industrial – security complex, for instance, depends on never-ending conflicts and wars, including the declared wars ‘on crime’, ‘on drugs’, and ‘on terrorism’, and the undeclared wars on immigrants and on gangs (and poor, dark-skinned, and working class youth more generally), among others, as well as more generally on the militarization of social control. Financial accumulation requires ever greater austerity that is hard, if not impossible, to impose through consensual mechanisms.

If the imperative of social control gives a powerful impetus to the militarization of global capitalism, this militarization has another key function, that of sustaining global accumulation in the face of stagnation. Militarization as response to the crisis of global capitalism achieves the simultaneous objectives of social control and repression and of coercively opening up opportu- nities for capital accumulation worldwide, either on the heels of military force or through the state’s contracting out to transnational corporate capital the production and execution of social control and warfare. The examples abound: the invasion and occupations of Iraq and Afghanistan; the transnational intervention in Libya’s internal conflict; the above-mentioned wars on drugs, terrorism, and immigrants; mass incarceration, including in prisons and detention centers constructed and often run by private corporations; the building of border walls (in Pales- tine, between the US and Mexico, in green zones in Iraq and elsewhere, between South Africa and several of its northern neighbors, and so on). Hence the generation of conflicts and the repression of social movements and vulnerable populations around the world becomes an accumulation strategy independent of any political objectives. This type of permanent global warfare involves both low and high-intensity wars, ‘humanitarian missions’, ‘drug interdiction operations’, ‘anti-crime sweeps’, and so on.

The US state as the most powerful component of the TNS has mobilized vast resources and political pressures, taking advantage of the dollar’s role as the global currency and therefore of the extraordinary power of the US Treasury, to absorb surpluses and sustain global accumulation by militarizing that accumulation and creating a global war economy under the pretext of a ‘war on terror’ and a ‘war on drugs’ (note also that wars accelerate the turnover time of the circuit of militarized accumulation).3 In sheer monetary terms, the escalation of US state military spending in the wake of September 11, 2001 is stunning (Table 1).

Table 1. US military spending, 1997 – 2012 ($billions, 2005)

Year Amount

1997 ……………………………..325

1998 ……………………………..323

1999 ……………………………..333

2000 ……………………………..360

2001…………………………….. 366

2002…………………………….. 422

2003 ……………………………..484

2004…………………………….. 544

2005…………………………….. 601

2006 ……………………………..622

2007…………………………….. 654

2008 ……………………………..731

2009 ……………………………..795

2010 ……………………………..848

2011 ……………………………..879

2012 ……………………………..902∗

∗ Projected

Source: http://www.usgovernmentspending.com/spending_chart_1997_

2012USb_13s1li111mcn_30t_30_Defense_Spending_Chart.

A twenty-first century fascism would not look like twentieth century fascism. Among other things, the ability of dominant groups to control and manipulate space and to exercise unprecedented control over the mass media, the means of communication and the production of symbols, images, and messages means that repression can be more selective and also organized ‘juridi- cally’ so that, for example, mass ‘legal’ incarceration takes the place of concentration camps. Such caging removes surplus labor from society and turns that surplus labor into a source of ongoing profits (see, inter alia, Alexander, 2010; Gilmore, 2007). The ideological and policing processes involved in the mass warehousing of ethnically oppressed groups and the poor have the effect of displacing social anxieties over crisis, economic destabilization, and downward mobility into the population targeted for marginalization, police repression, and caging.4 In this regard, vast new powers of cultural hegemony open up novel possibilities for atomizing and channeling grievances and frustrated aspirations into escapism and consumerist fantasies. Fashion and entertainment industries market anything that can be converted into a commodity. With this comes depoliticization at best, if not the ability to channel fear into flight rather than fight-back. The ideology of twenty-first century fascism often rests on irrationality; the promise to deliver security and restore stability is emotive, not rational. Twenty-first century fascism is a project that does not—and need not—distinguish between the truth and the lie.

Interpreting the Crisis

In conclusion, barring the overthrow of capitalism, any resolution of the crisis from the vantage point of the vast majority must involve a global redistribution downward of income. This, in turn, would have to involve establishing a measure of state intervention, regulation, and redis- tributive capacities that state elites, so far, have been unable or unwilling to undertake. It would mean reining in transnational finance capital—the most globalized and most globally mobile fraction of capital. We see here the contradiction between globalized capital and a nation-state based system of political authority. We see the structural power this disjuncture gives to the TCC, especially to transnational finance capital, as well as the obdurate penetration of national state apparatuses that the TCC has achieved in pursuit of its interests. In the United States, let us recall, corporations are legally considered ‘people’ and can now provide unlimited funding to political parties and campaigns. As never before, economic power translates into political control, or the power to determine political outcomes.

The most enlightened among transnationally oriented political and economic elites have been clamoring for TNS apparatuses with a transnational regulatory and interventionist capacity as a requisite for restabilizing the system. It remains to be seen if such efforts will come to fruition. Even if they do, it is unlikely, in my view, that a global capitalism ‘with a human face’ is possible—indeed, an oxymoron. A transnational neo-Keynesianism can do little to resolve the ecological holocaust. The reformist interpretation of the crisis as resulting from a lack of institutional regu- lation together with the unfortunate greed of the wealthy ignores, as it must if it is to remain true to its defense of capitalism, the contradictions of accumulation that generate the underlying causes of the crisis. Yet this reformist interpretation which is quite compatible with global capitalism may become hegemonic in the absence of an alternative anti-systemic interpretation put forward by organic intellectuals identified with the global popular and working classes and their interests.

Now from the viewpoint of those from below, the objective is not merely a project of redistribution within the prevailing global power structure and socioeconomic system; it is to redistribute power downward and transform the system. What type of a transformation? In my view, any transformative project would need to place democratic socialism back on the agenda. It would require new forms of production, collective laboring, and consumption that is in harmony with nature. We would want to—and must—develop new modalities of political organization in which the grassroots base and social movements are empowered to exercise democratic control from below. And any emancipatory project must involve building cultures of solidarity and transnational resistance.

Times of crisis open up space for collective agency and for contingency to influence the course of history in ways that are not possible in times of relative stability, and in ways that are less predictable than in such times. How the masses of people understand the nature of global crisis becomes itself a critical battleground in the struggle for alternative futures. Hence crucial to any struggle in global society to resist the war unleashed against the global working and popular classes is putting forward a coherent explanation of the crisis and of possible solutions from a working class, leftist, ecological, and democratic socialist-oriented perspective.

This is where organic intellectuals and socially committed scholars come in. In my view, and in conclusion, the only viable solution to the crisis of global capitalism is a massive redistribution of wealth and power downward to the poor majority of humanity along the lines of a twenty- first century democratic socialism, in which humanity is no longer at war with itself and with nature. Otherwise, humanity may be headed for what Chew (2007) has termed a new dark age.

Acknowledgements

This article is based on a keynote speech delivered at the International Conference on ‘Global Capitalism and Transnational Class Formation’, jointly sponsored by the Global Studies Center of the Czech Academy of Sciences, the Global Studies Association North American branch, and the globalization research unit of the International Studies Association, September 16 – 19, 2011, Prague. The ideas on global crisis developed here can be found in further detail in Robinson (2008, 2010, 2011, 2012, forthcoming), and Robinson and Barrera (2012). I would like to thank Globalizations special issue editor Jason Struna and two anonymous reviewers for their suggestions.

Notes

1 One of the most notorious outcomes of globalization is an alarming widening of the gap between the global haves and have-nots, as, among countless studies, the annual Human Development reports of the United Nations Development Program show (UNDP, 1992 – 2011). The annual World Wealth Report published by Merrill Lynch and Capgemini identifies what it terms High-Net-Worth Individuals, or HNWIs, those people who have more than $1 million in free cash, not including property and pensions. The 2011 report identified some 10 million of these HNWIs in 2010, concentrated in North America, Europe, and Japan, but with the most rapid growth among the group taking place in Asia-Pacific, Latin America, Eastern Europe, Africa, and the Middle East. The collective wealth of the HNWIs surpassed $42 trillion in that year, well over double of what it was 10 years earlier, and 10% higher than the previous year (Merrill Lynch and Capgemini, 2011). Beyond the growth of the superrich, however, is social polarization between some 20% of humanity that has been able to enjoy the fruits of the global cornucopia and some 80% that has experienced downward mobility and heightened insecurity and lies outside what McMichael (2007) refers to as ‘global consumer networks’.

2 On such reformist, institutionalist, and neo-Keynesian thinking, see inter alia, Soros (1998), Stiglitz (2003), and

Sacks (2006). These three are neither anti-capitalist nor anti-globalization; they speak of a capitalist globalization ‘with a human face’.

3 I cannot here expand on the matters of militarization and intervention as accumulation or on the role of the US state, but see inter alia, Robinson (2007, 2012, and forthcoming, esp. chs 3 and 5).

4 On these themes, the modern classic 1970s’ study by Stuart Hall and his colleagues, Policing the Crisis (1978) still bears remarkable pertinence.

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By Prabhat Patnaik

At first sight no two persons could have been more dissimilar.  One was a Cambridge don, with more than one foot in the British government; a supporter of the Liberal Party, staunchly opposed to the Bolshevik Revolution; an aesthete and a member of the Bloomsbury Group; a life peer in imperial Britain, and a solid, if sensitive, member of the British establishment.  The other was a Russian revolutionary, spending years in exile in acute penury, immersed in bitter conflicts among the émigrés, until suddenly confronted with a revolutionary uprising whose strivings and possibilities he comprehended with such clarity that he came to lead it, facing a civil war, a typhus epidemic, and an assassination attempt that ultimately claimed his life.

The secure tranquillity of the life of the one contrasted sharply with the tempestuous violence that continuously haunted the life of the other.  What could these two have in common?

For a start each felt a deep intellectual respect for the other, despite their political differences.  In his report to the second congress of the Communist International, having called John Maynard Keynes “a British bourgeois pacifist”, “a petit bourgeois philistine” and “an implacable enemy of Bolshevism”, V.I. Lenin went on to base his entire thesis about why conditions were ripe for a world revolution on Keynes’s analysis in The Economic Consequences of the Peace.  He even paid Keynes the compliment that “nobody had written about the condition of capitalism better than Keynes”.  Keynes, on his part, not only referred in several places to Lenin’s “brilliance”, but, in this same book, said apropos of inflation: “Lenin is said to have declared that the best way to destroy the capitalist system is to debauch the currency; . . . Lenin was certainly right.”

But mutual intellectual respect among bitter adversaries is neither unusual nor particularly remarkable.  What is really common to both these thinkers is their belief that the hegemony of finance in the period of maturity of capitalism had brought about a denouement where it became impossible for the system to go on as before.  Of course each had his own understanding of why finance had made capitalism impossible, and each had his own reading of where to go from there.  But the belief that a sheer continuity of the existing order was no longer possible was common to both.

Keynes saw the hegemony of finance as saddling capitalism with such extraordinarily high levels of unemployment that people, he feared, would not for long tolerate such an inhumane system.  Under this hegemony, speculation was no longer a mere bubble on a steady stream of enterprise, but became a torrent that buffeted enterprise around. 

This became particularly so after the prop that had sustained 19th-century capitalism, namely the pushing of the frontier, had reached its limits.  Not only did employment get determined largely by the whims and caprices of speculators, but in the absence of this prop would remain much higher than before, of which the Great Depression was a manifestation.  He wanted the system to become more humane in order to survive the challenge of socialism.  And this it could do by ensuring, through systematic State intervention in demand management, that the level of employment was made independent of the whims and caprices of financial speculators.

Lenin by contrast saw finance capital as striving everywhere for domination and for the acquisition of “economic territory” at the expense of rivals.  Hence the rivalry between different “national” finance capitals (belonging to big “nations”), each backed by “its” State, would henceforth take the form of bloody inter-imperialist wars, of which the First World War was a manifestation.  Escape from this predicament was possible only by overthrowing the entire system of finance-dominated capitalism and by ushering in socialism.

The turn of events was such that the ideas of both these thinkers were tried out in practice, a fate denied to most and another element that is common to both.  Keynes’s proposal for State intervention in demand management in capitalist economies had few takers in the beginning, a fact that allowed the Great Depression to persist outside of the fascist countries right until the eve of the war when military preparations against the threat of fascism finally pulled up levels of employment and activity.  But in the post-war period, with the balance of class strength shifting in favour of the working class across the advanced capitalist world, of which the emergence of social democracy was a manifestation, State intervention in demand management got institutionalized, producing the so-called “Golden Age of capitalism”.  And as regards Lenin, the response generated by his call for the overthrow of capitalism, the Bolshevik Revolution and the formation of the Communist International, the struggle of the Soviet Union against fascism, its contribution to post-war decolonization and the spread of socialism, constitute together the epic saga of the 20th century.

But, again by an irony that unites both these thinkers, the historical experiments unleashed by them, despite remarkable early promise, could not reach successful fruition.  The process of globalization of finance made the nation state that was supposed to override the whims and caprices of finance, subservient precisely to these very whims and caprices for fear of capital flight; as a result we have the current bizarre spectacle of capitalist countries enacting one after another ‘austerity measures’ in the midst of a recession, which will only accentuate the recession.  Keynes would be turning in his grave at this absurd course of events.  Likewise, the Soviet Union founded under Lenin’s leadership no longer exists; communist parties, barring a few, have dwindled into insignificance; the socialist credentials of China and Vietnam are barely visible and have to be established by the committed few through elaborate theoretical and statistical exercises; and a question mark hovers over the fate of Cuba, buffeted by imperialism.  Those who invoke either Keynes or Lenin today are few and far between.

Does this mean then that the projects of both Keynes and Lenin are equally passé?  The answer is no, and this constitutes the big contrast between the two.  Because Lenin’s project was grand, nothing short of bringing about a wholly new world order, the like of which mankind had only dreamt of but never seen, and that too against the bitterest possible opposition from the propertied classes, he was acutely aware of the prospects of the failure of his particular experiment.  In fact, after Soviet power had lasted three months, he had remarked gleefully: “We have lasted longer than the Paris Commune!”  Because of the grandeur of his project the possibility of the failure of his particular experiment was anticipated by Lenin.  But not so with Keynes.

Since his objective was to defend the system of private property against socialism, he not only expected no systematic opposition from the propertied classes, but even attributed whatever opposition he actually encountered from them to mere intellectual failure on their part.  After all, if demand management by the State increased the level of activity and employment in the economy, then that would benefit both the workers (through larger employment) and the capitalists (through larger profits).  So the predicament of late capitalism was one from which, if one had the correct intellectual comprehension, one could improve everybody’s condition.  What Keynes did not see is that State intervention in capitalism is something which sets off a dialectic of its own that ultimately subverts the domination of capital over labour.  Not that Great Depression-levels of mass unemployment are necessary for capitalism but the elimination of such levels of mass unemployment through State intervention undermines the social legitimacy of the system.  The setback to Lenin’s project would not have surprised Lenin; the setback to Keynes’s would have surprised Keynes.  Lenin’s project will be revived, but not Keynes’s, except as a staging post in the march towards Lenin’s goal.

- Prabhat Patnaik is a Marxist economist in India